Assignment :Competency
Evaluate the proper accounting for transactions with respect to interim and segment reporting using the accounting codification and other accounting research tools.
Scenario
CM Corporation (CMC) was founded six years ago by Phil Connor and Eric Martin. The company designs, installs, and services security systems for high-tech companies. The founders, who describe themselves as "entrepreneurial geeks," met in a computer lab when they were teenagers and found they had common interests in working on security systems for critical industries. CMC hired you as a junior accountant this year.
Lately, Connor and Martin have been working with "radio frequency identification" (RFID) technology. They have developed a detailed system designed to track inventory items using RFID tags embedded invisibly in products. This technology has numerous inventory applications in multiple industries.
One of the most basic applications is tracking manufacturing components; if tagged components "go walking" (if employees attempt to take them), companies can easily track and find them. Connor and Martin have sold their system to several high-tech companies in the area. These companies have a number of government contracts that require extensive security systems to protect sensitive data from infiltration by terrorists and others. To date, CMC's cash flow from sales and services has adequately funded its operations.
CMC expects much growth potential for its products. As a result, they are considering going public and expanding internationally in the near future. Many of the issues you will address in this course project involve researching topics involving these anticipated events.
Instructions
Connor and Martin have heard that IFRS is used internationally for financial statements, but they know very little about it. Since they will most likely be going public and expanding internationally in the near future, they are considering switching to IFRS from GAAP and would like more information. They also realize if they go public and expand their business, they will have to deal with some issues they have not had to deal with previously, such as interim and segment reporting. Prepare a research memorandum for Connor and Martin addressing their questions below:
What are the similarities between GAAP and IFRS?
What are the major differences between GAAP and IFRS?
What are the requirements for interim reporting under both GAAP and IFRS?
Are there any problems or issues associated with interim reporting?
What are the advantages and disadvantages of providing segmented reporting?
What are the requirements for segment reporting under both GAAP and IFRS? Include the definition of an operating segment.
Memorandum Mechanics should be as follows:
The body of the memorandum should be a professional presentation centered on clear and concise writing. The responses to the questions should be detailed, well researched, and specifically related to CMC's industry.
Use the FASB Codification and IFRS to address all technical accounting issues presented in the questions, being certain to reference the applicable sections of the Codification and IFRS in your report. You may quote directly from the Codification and IFRS as long as all direct quotes are included in quotation marks.
Any other sources used to support your responses should similarly be properly documented. You should have other credible sources in addition to the Codification and IFRS.